Asian rate markets likely to show diverging responses again

In the midst of the negative EM sentiment, individual Asian rates markets are expected to show diverging responses again. TGBs and KTBs will continue to perform well like safe-haven assets with yields lowering. Meanwhile, CNH rates, HKD basis and SGD rates are facing upside pressures. The RMB's continuous negative sentiment is expected to have benefited CNH rates. The Chinese central bank has stated that from 25 January 2016 a reserve requirement will be imposed on RMB deposits which offshore financial institutions place at onshore financial institutions.